Credit cards offer pricey — and unnecessary — extra products

Open a credit card account and you might walk away with more than just plastic.

Banks and their vendors heavily hawk card-related services, such as credit monitoring, that can add up to hundreds of dollars of year in fees.

But often consumers don't need these add-ons. In fact, they can take a few simple steps for little or no money and enjoy protections and access to information similar to what's promised by the services.

Federal regulators have taken note — and action.

Regulators recently ordered Capital One Bank to refund about $150 million to 2.5 million customers who were pressured or misled by the bank's vendors into buying card products they didn't want or couldn't even use.

With consumers counting every penny these days, it makes no sense to pay for services of questionable value. Here are some card services you likely don't need:

Payment protection This product typically promises to cancel debt or suspend minimum monthly payments if the cardholder experiences a job loss or disability.

Monthly premiums are tied to balances. A U.S. Government Accountability Office report last year found that premiums ranged from 85 cents to $1.35 for every $100 owed.

CreditKarma.com says the average balance for Baltimore cardholders is around $5,100. That means the typical consumer here would pay $43.35 to $68.85 a month for payment protection.

"It's not cheap coverage," says Gerri Detweiler, director of consumer education for Credit.com, a card comparison site. "And part of the issue is when folks go to collect, a lot of times they run into various roadblocks in the fine print that make it difficult to collect."

Self-employed people may not be covered if they're not working, she says, or a claim may be rejected if the customer is behind on payments.

Payment protection has been highly profitable for banks, though. The GAO says that customers of the nine largest card issuers paid about $2.4 billion for payment protection in 2009, but received only $518 million in benefits.

This was one of the products pushed by Capital One's vendors and was the subject of consumer lawsuits. Some major banks have backed off it.

The latest to do so is Bank of America, which stopped selling payment protection to new credit card customers last month. Bank of America says customers already enrolled will continue to receive the service for six more months for free before it's canceled.

Spokeswoman Betty Riess says this is part of a strategy to streamline the bank's business and has nothing to do with a tentative $20 million settlement with consumers reached in July. These consumers sued the bank, claiming it enrolled them without their permission into a protection plan that had so many limitations that it was difficult or impossible for them to reap any benefit.

Consumers would be much better off depositing the money they pay for this service in the bank and establishing an emergency fund. In a matter of months, they could have enough set aside to either pay their balances if they fall on hard times or at least keep up with minimum card payments.

"Even if you don't have that rainy day fund and are delinquent 90 days, your card company will work with you," he says.

Credit monitoring Some issuers and companies offer credit report monitoring as an identity theft protection service that often runs about $15 per month. The service is not worth the price, card experts say.

Card issuers have a legal responsibility to protect a customer from fraud, and they have developed sophisticated methods to quickly spot suspicious charges.

"It galls me to no end that they make money off something they should be doing to protect their customers anyway and save themselves money," said Linda Sherry, a spokeswoman in the Washington office ofConsumer Action, a nonprofit advocacy group.

Arnold notes that credit card customers are generally covered by zero-liability policies, so they wouldn't be held responsible for fraudulent charges to begin with.

Consumers can do their own credit monitoring for free by frequently reviewing their accounts online, Arnold adds. They also can set up email or text alerts that will notify them when the card is used or when purchases are made above a certain dollar amount.

People can monitor their credit reports by taking advantage of a federal law that entitles them to one free credit report annually from the three major credit bureaus — TransUnion, Equifax and Experian. This is available through annualcreditreport.com or by calling 877-322-8228.

In Maryland, state law entitles residents to a free report each year from the three bureaus, which must be contacted individually. That's a total of six reports each year under state and federal laws. Marylanders can set up a free monitoring system by ordering a report every other month.

If you want to prevent a thief from opening new lines of credit under your name, put a freeze on your credit report. This prevents a new creditor from seeing your report, which means it's unlikely to allow anyone — you included — from opening new credit.

Marylanders must pay $5 to freeze a report and another $5 to lift the freeze. Each bureau has its own instructions on freezing a report, so check the companies' websites for directions.

Card registration Lose your wallet or purse, and you will have to notify all the card issuers to get replacements. For a fee, you can register your cards with a company that will make those calls for you. American Express' Lost Wallet Protector, which also can help replace a lost passport, costs $39.99 a year.

Ben Woolsey, director of consumer research for CreditCard.com, a card comparison site, says this is unnecessary.

"Why not do it yourself? Make a few phone calls and save yourself some money," he says.

If you used a card registration service, you would have entered your card information when you signed up, he notes. Collect this information for yourself and keep it in a secure location in case you lose your wallet and need to call the card companies.

Card issuers will continue to pitch extra services for a fee, but Consumer Action's Sherry says most consumers may not realize that the best perks are free.

For example, some cards provide purchase protection, which reimburses consumers if an item purchased with the card is stolen or damaged within 90 days, she says. Others automatically extend the warranty of products paid for by credit card. And some cards offer concierge services, she says, which can help with ticket purchases and vacation planning.